If you’ve been investing for several years with mixed results, you may be searching for a way to improve your investing skills and essentially become better at investing.
Investing is not a single topic, but a library of interconnected strategies, experiences, history and knowledge. A comprehensive answer to the question of how to become better at investing can will not be found in a short listicle. Below, we’ll explain the different steps you can take to become better at investing, and will refer you to other articles or guides we’ve produced that focus on different areas.
Avoid beginner mistakes
If gaining knowledge is like building a home, it makes logical sense to begin with the cornerstones and build from the ground up. In investing terms, this means mastering the basics and learning to avoid obvious pitfalls before attempting to digest advanced techniques.
Why does this make sense? It’s the lazy way to learn – by tackling the easier information first, you’ll bring yourself further, faster. You may also struggle to fully understand more complex financial articles if you haven’t grounded yourself in the terminology of investing, which can be learned at this stage.
An interesting way to test the basics is to read guides on how to avoid the common mistakes of new investors. These mistakes, and the lessons learned, fall out from the core principles of investing. Therefore if you read these guides and feel like you knew all of this beforehand, this suggests that you’re ready to take your personal development to the next level.
Absorb finance theory – consider a qualification
If you want to learn what the professionals know, grab yourself a financial qualification. Did you know that most investment qualifications can be self-studied and require no training contract with a financial services firm?
Here are three UK qualifications that may interest you:
Diploma in Regulated Financial Planning by the Chartered Insurance Institute
Chartered Financial Analyst qualification by CFA UK
Diploma For Financial Advisers – IFS School of Finance
These are incidentally some of the qualifications taken by those planning to become a financial adviser.
A qualification is a serious commitment. Even though these courses allow you to study at your own pace and set exam dates at your leisure, each module may require up to 100 hours of studying and each course contains over 6 modules. That should give you an idea of the time you will need to spend to achieve your goal. Although in our opinion the amount of knowledge you will gain through these courses is second-to-none, and this could be a very rewarding way of spending your time if you want to become better at investing.
Study the lessons of the investing greats
Investing giants have come before us, and thankfully many of them wrote down want they personally learned from a lifetime of investing.
Investing gurus such as Warren Buffett, as well as other influential thinkers such as John Bogle (founder of Vanguard Group) and Peter Lynch have all penned bestselling titles that you can pick up for less than £10. Technically, Warren hasn’t authored a book but his letters to Berkshire Hathaway shareholders over the years have been edited and compiled so that you can learn all the gems of wisdom he passed on to his followers.
The best books offer an attractive balance of freedom and detail. You can read as little and often as you little, with no pressure to maintain a tight schedule or hit deadlines like with an investing course.
Master your investing psychology
Becoming a better investor isn’t just about being book-smart – it’s about making decisions at the right time and putting that knowledge consistently into action.
To do this, you also need to conquer the fears and anxieties that can appear when investing. No investor is immune to the human aversion to risk, recency bias, and other perfectly common irrationalities that can disrupt a perfect financial plan.
Read more: Investing psychology series
Put it all into practice
The worst investors are perhaps those who never invest at all. Over the long run, stock markets have consistently outperformed all other asset classes, leaving those who sat in cash far behind.
When investing, it can be tempting to wait until you have mastered all facets of this topic before you commit another penny, but this could be folly.
The world of finance has unknowable depth and even investment professionals don’t claim to know everything. Finance academics specialise in very narrow fields to be able to command expertise in an area, so you have little chance of feeling like you are genuinely a better investor than everyone else.
On reflection, it can be healthy for investors to assume that other market participants are smarter than them because it encourages investors to take a passive approach such as investing in all companies, rather than agonising over stock picks in an attempt to beat the market.
Studies have shown that passive strategies such as buying a cheap equity ETF will beat active strategies most times out of ten, so a dose of humility can really yield dividends for investors.
What to avoid when trying to become better at investing
To conclude this article, we wanted to share a few quick-fire tips of what to avoid when seeking to become a better investor:
1. Short pieces of advice from unknown people on TikTok
User-created videos on TikTok are published without any fact-checking and as a result, false claims and bad financial advice are rife on the platform. Short videos lend themselves to inspirational or ‘wow’ moments but rob you of your ability to ask ‘wait… but what about?’. No single idea can be explained thoroughly in the average 26-second length of a TikTok clip. Even if a content creator is well-informed, you may be left with a dangerously incomplete version of a concept. 26 seconds provides no room for risk warnings, counter-points or even multiple examples to better illustrate a concept. It’s not the best environment to build a well-rounded understanding of how finance works.
2. Expensive investment courses
You may see online investment courses that promise to tell you how to get rich quick. Their slick marketing may explain that the course will teach you the secrets of profitable investing or day trading. These courses are often modestly priced but serve as a sales funnel to give the provider an opportunity to sell a £2,000+ course which is either delivered online or in a 3-day conference setting.
These courses are almost universally condemned as poor value and offering little content. Some even discover that these premium courses are merely a sales pitch for a larger, £8,000+ course!
Contrast that to the £1,000 all-in cost to buy the study materials and sit all exams for the Diploma in Regulated Financial Planning course by CII. This is a nationally-recognised qualification that is a pre-requisite to becoming a financial adviser and will provide you with some additional letters after your name. You can see the difference in value.
On the other hand, you can find some gems online such as 5-hour investment courses that you can pick up for just £20 – £50. These offer excellent value and can communicate as many principles as a good book but in a more engaging and memorable manner. We list good examples of these on our investing courses page.
3. High-risk strategies
As we explain in our ultimate guide to risk, high-risk investment strategies should always be evaluated against the level of risk they demand, rather than straightforwardly compared to the returns of simple, low-risk strategies.
Comparing the higher returns of a high-risk strategy to the lower returns of a moderate-risk strategy and concluding that the higher-risk strategy must be better because it returned a higher sum is not a fair comparison. The very definition of risk suggests that had things gone differently, the high-risk strategy may have faltered. Luck, rather than strategy may have been the only reason why the high-risk strategy paid off.
If you only manage to increase the expected return of your portfolio because you’re taking on significantly more risk – you may not be a better investor after all.
We hope you’ve enjoyed this quick guide on how to become a better investor. We hope that this article inspires you to keep learning and moving upward in your wealth-creation journey.